2008 (12) TMI 124 - AT - Central Excise

Non-maintenance of separate accounts - Denial of credit of duty on the inputs which go into manufacture of dutiable as well as the exempted medicines and also on the inputs which are exclusively used in the manufacture of exempted medicine - Since the goods, in question, are exempted goods and have been exported, the provisions of sub-rule 5 become applicable and therefore, neither sub-rule 1 would be applicable nor sub-rule 2 & 3 of Rule 6, would be applicable credit allowed - assessee s appeal is allowed

Summary

Issues:
1. Cenvat credit on inputs for manufacturing exempted and dutiable medicines.
2. Demand of 8% value on clearances of exempted medicine for export.
3. Requirement of maintaining separate inventory for goods meant for export.

Analysis:
1. The Appellant manufactured medicines, with one fully exempt under Notification No. 6/02-C.E. and others dutiable. They took Cenvat credit on inputs for both types of medicines. The Asstt Commissioner demanded Rs. 2,60,626 against the Appellant and imposed a penalty of Rs. 50,000 for not paying 8% value on clearances of the exempted medicine for export. The Commissioner (Appeals) upheld this decision. The Appellant argued that since the exempted goods were exported, the provisions of Rule 6(3) did not apply. They cited relevant tribunal judgments supporting their claim for a refund of Cenvat credit on exported exempted goods.

2. The JCDR contended that the Appellant should have maintained separate inventory and accounts for goods meant for export and those for home consumption. As the Appellant did not do so, they could not claim exemption from paying 8% of the sale value of the goods under Rule 6(3). It was emphasized that maintaining separate records was crucial, especially for goods exempt from duty, to avoid liability for the 8% payment.

3. The Tribunal analyzed the case and noted that the exempted goods, which were fully exempt from duty and exported, fell under Rule 2(d) of the Cenvat credit Rules. Rule 6(5) exempted goods exported without duty payment from the application of sub-rules 1, 2, and 3. Relying on previous tribunal judgments, the Tribunal found that since the goods in question were exempted and exported, sub-rules 1, 2, and 3 of Rule 6 did not apply. Consequently, the impugned order demanding the 8% payment was set aside, and the appeal was allowed with consequential relief.